Brazil will not “for several years” see repeat of the cotton sowing surge that it witnessed in the last decade, US officials said, citing the high price of machinery, as well as of inputs such as fertilizers.
Brazil’s cotton area soared by 77% in the three years to 2019-20, lifted by factors including the growing use of safrinha sowings, as a follow-on crop after the early-year soybean harvest, and strong demand for exports, which tripled over the same period.
However, sowings, which peaked at 1.67m hectares in 2019-20, look unlikely to make another jump for now, thanks to the cost of scaling up production further, the US Department of Agriculture’s Brasilia bureau said.
“Contacts have pointed out that rapid area expansion seen… to 2020 was fuelled by costly investment in equipment,” the bureau said, noting the creation of an “optimal planted area-to-equipment balance”.
A further “immediate jump in further expansion is unlikely to be significant given the expense of acquiring new machinery – for example, new cotton pickers run upward of $1m.
“Another large leap in cotton planted area will not occur for several years.”
Cotton vs corn, soybeans
Indeed, in 2022-23, as starts in August, Brazilian plantings will ease 50,000 hectares from this season to 1.55m hectares, eroded by the rising costs of inputs such as fertilizers and herbicides.
“In this environment of high production costs, it is important to note that most growers in Brazil have the option to plant alternative crops.
“Both soybean and corn prices have been hitting record highs and are projected to remain high.
“With a smaller upfront investment and currently high profit margins for soybeans and grains… some growers will favour those commodities at the expense of cotton.”
The bureau added that in the key Centre West growing area, which includes the top cotton-producing state of Mato Grosso, “for soy and corn, it is estimated that top farmers could reduce fertilizers 15%, with just 5% reduction in yield.
“For cotton, reducing fertilizer use would prove more difficult.”
In Mato Grosso, the cost of growing cotton, at R$11,800 per hectare, for 2022-23 is more than twice that for genetically modified soybeans, at approaching R$4,800 per hectare, and corn, at R$3,270, according to the state’s Imea research institute.
Cotton’s costs reflect in the main fertilizers, at R$5,192 per hectare, up 55% year on year, overtaking agrichemical costs up 17% at R$3,846 per hectare.
The USDA bureau pegged Brazil’s cotton production in 2022-23 at 12.60m bales, a decline of 400,000 bales from the output expected for this season, for which Mato Grosso’s key safrinha cotton crop has yet to be harvested.
“The estimate may be revised further pending weather during crop development in the April-to-June timeframe,” the bureau said.
‘Absence of precipitation’
In fact, April was marked in Mato Grosso by an “absence of precipitation [that] has left cotton growers on alert, since, if this scenario continues, the Soil moisture reserve will not be enough to maintain current productivity in some regions” of the state, according to Imea.
“Fear” provoked by the drought prompted farmers to slow forward selling of their 2021-22 cotton crop to just 2.1% of the expected harvest, taking the total proportion fixed to 70.1%.
For 2022-23, by contrast, growers sold 5.4% of their expected output over the month, taking hedging to 28.3% complete, with the greater pace reflecting elevated prices, which according to an Imea index are up 22% this year in Mato Grosso.